Overview
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The following sequence diagram gives you an overview of the standard happy path of creating a product, list it to a distribution platform and retrieving information about investments into a product.
As of now, only creation of digital securities is possible. If you want to create and distribute crypto securities please reach out to support@cashlink.de.
The term redemption is used here to refer to all kinds of lifecycle events of a security that involve the reduction of a balance of an investor. Such events include the following (not complete):
Repayment of a bond at the end of the runtime of the contract
Full or partial cancellation of a bond during the runtime of the contract - either by the issuer or by the investor
Redemption of fund shares to the investment company
For all these events, the redemption process involves the following steps:
Redemption notification: The issuer publishes information about an upcoming redemption. The information includes the number or percentage of shares eligible for redemption, the redemption execution date and - if applicable - the list of wallet addresses eligible for redemption.
Redemption execution: The redemption execution fixates the wallet addresses and redemption amounts on theses wallet addresses. Those amounts will be transferred from the investor's wallet addresses.
Redemption payment: All amounts transferred from the investor wallet addresses are eligible for a redemption payment.
All process steps can happen simultaneously. For example, if an investor cancels a bond contract, after receiving the cancellation, the issuer (1) notifies the investor about the redemption, (2) executes the redemption and (3) triggers the repayment at the same time.
Let's have a closer look at the individual steps of the redemption process.
The first step of the redemption process is for the issuer to notify the owners of all eligible wallet addresses about the upcoming redemption. The notification needs to contain the following information:
ISIN or other identifier of the security
Network and smart contract account address of the security on the network
Number of shares / percentage of shares eligible for redemption
Redemption execution date and time
List of wallet address eligible for redemption (or "all", meaning all addresses with a positive balance at the redemption execution date)
Redemption mode (see Redemption execution)
Redemption wallet address (if applicable, see Redemption execution)
The redemption execution must be started exactly at the redemption execution date and time. At this point, the list of wallet addresses that will be considered for the redemption is fixated. Prior to the redemption execution date and time, investors still have the option to buy the security to benefit from the redemption (given that this new wallet address is on the list of eligible addresses published in the redemption notification). Transfers that happen after the redemption execution date and time will not affect this.
At the redemption execution date and time, you may use the statistics report, the Cashlink Studio or data provided via the investment endpoint of the Issuer API to determine the list of eligible wallet addresses and corresponding redemption amounts.
After this list has been created, the redemption is processed. There are two options for processing a redemption execution:
(1) Direct mode: The eligible balances are directly transferred from the investors wallet addresses at the execution date and time. This process can only be used for digital securities and crypto fund shares. The individual redemptions will be triggered using the Distributor API.
(2) Transfer mode: Owners of wallet addresses eligible for a redemption need to transfer the eligible amount to a redemption wallet address after the redemption execution date. The redemption wallet address has been published by the issuer as a part of the redemption notification.
After the redemption has been executed, the transfers can be retrieved and verified using the Cashlink Studio, the statistics report or via the investment endpoint of the Issuer API. Only such owners of wallet addresses are eligible for a payment, that have successfully transferred the amounts (if transfer mode was used) to the redemption wallet address.
Based on the list of successful redemption transfers the issuer will calculate the redemption payment amounts. Those amounts will be paid out to investors reduced by capital gains taxes if applicable.
If the direct mode is used, usually all eligible wallet addresses will be considered for repayment. If the transfer mode is used, it could happen that investors fail to transfer the amounts to the redemption wallet address. In this case, these investors will not receive redemption payments.
